2/14/2002 @ 3:50PM

Sherron Watkins Had Whistle, But Blew It

A whistle-blower, literally speaking, is someone who spots a criminal robbing a bank and blows a whistle, alerting the police. That’s not
Sherron
Watkins
Sherron Watkins
.

What the
Enron
vice president did was write a memo to the bank robber, suggesting he stop robbing the bank and offering ways to avoid getting caught. Then she met with the robber, who said he didn’t believe he was robbing the bank, but said he’d investigate to find out for sure. Then, for all we know, Watkins did nothing, and her memo was not made public until congressional investigators released it six weeks after Enron filed for bankruptcy.

Watkins testified today to a congressional subcommittee investigating Enron. She has been hailed as a whistle-blower so often it’s starting to sound like part of her name. But a whistle-blower is someone who alerts the public. She never did. What she did was send an anonymous memo to Enron Chairman
Kenneth
Lay
Kenneth Lay
, raising “suspicions of accounting improprieties.”

After she identified herself, Lay met with her for about an hour to discuss her concerns and she gave him additional information detailing her allegations, according to a memo from
Vinson & Elkins
, the law firm Enron then hired to “conduct an investigation.” The V&E memo does not indicate what Lay told Watkins. But congressional investigators have said Watkins claimed that Lay promised to fire both Enron’s auditor
Arthur Andersen
and V&E. (For more on V&E’s investigation, see “Enron’s Lawyers: Eyes Wide Shut.”)

Lay did neither. In her memo, Watkins wondered, “Has Enron become a risky place to work?” Whatever the answer, Watkins kept her job and works at Enron to this day. She outlasted Lay, who should have been fired, but quit first, and Arthur Andersen, which should have quit, but waited around to get fired. In addition to her job, Watkins kept her silence, at least publicly.

The V&E investigation concluded that the transactions Watkins questioned appeared proper, though they might look bad.

Far from whistle-blowing, Watkins’ actions actually provide cover for Lay and the Enron board. First, the fact that Watkins “warned” Lay presumes he knew nothing and needed to be warned. This presumption will be a key element in Lay’s legal defense.

In her testimony today, Watkins continued to provide cover for Lay and the board. She said that after she spoke to Lay, Enron’s then Chief Financial Officer
Andrew
Fastow
Andrew Fastow
wanted her fired and her computer seized. She told the congressmen that Chief Executive
Jeffrey
Skilling
Jeffrey Skilling
, Fastow and other executives “did dupe Ken Lay and the board.” She heaped additional blame on Arthur Andersen and Vinson & Elkins.

“Mr. Skilling and Mr. Fastow are highly intimidating,” Watkins said. “I think they intimidated a number of people into accepting” the partnerships. But the V&E memo points out that the board approved the most controversial partnership transactions–those involving the Fastow-controlled
LJM
partnerships–at a special meeting on June 28, 1999, more than a year before Watkins wrote to Lay.

A movie deal is in the works painting her as a feminist icon. Some in Hollywood compare her to
Erin
Brockovich
Erin Brockovich
. Congressmen hail Watkins’ courage. But if anyone’s job at Enron is now secure, it’s hers.

Watkins testified she heard that Fastow wanted her fired. Did Lay protect her–and is that why she is now protecting Lay? Many people were in a position to expose Enron’s accounting. Each did nothing. Watkins did something. But not much.